Microsoft sues Vancouver family for $750,000 US over alleged 'click fraud'

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A Vancouver family has become the first party to be sued by Microsoft for so-called click fraud — a growing concern in the world of online advertising.

Microsoft filed the $750,000 US lawsuit in a U.S. District Court in Seattle on Monday against Vancouver residents Gordon Lam, his brother, Eric, and mother, Melanie Suen. The suit alleges the family manipulated the so-called pay-per-click system used to charge for online advertising.

The family allegedly targeted companies that were paying Microsoft to have their business associated with certain search terms, such as "cheap auto insurance."

Normally, when someone types in a particular phrase or keywords into Microsoft's search engine, a listing for an advertiser that has bid on the words shows up at the top of the search results page in the sponsored links section.

If the person then clicks on that link to the company's website, the company pays Microsoft anywhere from a nickel to hundreds of dollars, depending on the amount it had bid with Microsoft.

The more the companies are willing to pay for each click, the closer to the coveted top position on the search results page their link will appear.

Microsoft alleges the Lam brothers and their mother used a complicated scheme to continuously click on the links of their competitors, with the goal of draining their advertising accounts with Microsoft.

When those accounts were emptied, the competitors' ads no longer appeared and the Lam's own advertisements were able to move up the rankings toward the coveted top spot on the results page, all for a lower price, Microsoft alleges.

Microsoft's lawyers allege the family had seven accounts with Microsoft tied to two companies, whose business was based around the auto insurance sector and the online game World of Warcraft. Microsoft also alleges the Lam brothers and their mother used a series of proxy servers to hide their activities.

Microsoft claims as a result of the scheme, it had to pay $1.5 million to its advertisers in compensation after the fraud was discovered.